A $1.2 billion valuation, $200 million funding and 20 million monthly active users.?That's how one could picture the story of a messaging app startup that is now shutting down. The reason? 95% of its users turned out to be fake.
Two years ago, the messaging app startup called IRL was riding high. It had reached a $1.2 billion valuation in a $170 million Series C funding round led by SoftBank Vision Fund 2. Boasting its ¡°unicorn status¡± and noting that it had raised more than $200 million to date, the company described itself as ¡°the leading group messaging social network that brings people together through events and shared experiences.¡± CEO Abraham Shafi stated, ¡°Our primary goal at IRL has always been to create more authentic and organic communities.¡±?
Just how authentic those communities were came into question last year when employees cast doubt on the CEO's claims that the app had 20 million monthly active users, as per a Fortune report.
Now, fast forward to today and the venture is shutting down, admitting that those claims had been incorrect¡ªto put it mildly. The board of directors concluded after an investigation that 95% of the users were ¡°automated or from bots,¡± as The Information reported.
¡°Based on these findings, a majority of shareholders concluded that the company¡¯s going forward prospects are unsustainable,¡± a spokesperson told the outlet, saying the venture would shut down.
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Earlier this year, a former employee alleged that IRL--with the name meaning 'in real life'--had fired him after he voiced concerns that many users were bots, and in April Shafi resigned as CEO.
The Securities and Exchange Commission (SEC) had already begun an investigation into whether the company had violated securities laws in the way it portrayed its business performance to investors, among other issues.
Many leaders from other startups were quick to weigh in on the company¡¯s downfall, the report mentioned.?¡°Building a real business without fraud means it¡¯s nearly impossible to reach ¡®unicorn status¡¯ in a few years time,¡± tweeted Winnie CEO Sara Mauskopf, whose company offers a marketplace for child care.?¡°Lots more stories like this coming. The insanity of the last 3 years is going to lead to a bad hangover,¡± tweeted Sean Byrnes, previously CEO of Outlier.ai, adding, ¡°Oh, man, the number of times I¡¯ve been asked why my company isn¡¯t growing as fast as X and then found out X was a fraud all along.¡±
¡°The overnight unicorn that the media loves to prop up and VCs love to throw $$ into just is not a thing,¡± tweeted Squad founder and CEO Isa Watson.?At its peak more than a year ago, IRL had about 100 employees, and it had also raised capital from Founders Fund, Goodyear Capital, and Floodgate Fund.
¡°We have the opportunity to build WeChat for the rest of the world,¡± Shafi told The Verge in 2021, referring to the messaging app in China that has more than a billion users, as per the report.?It appears safe to say IRL won¡¯t get there.
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